Corporate Governance Framework Of Coca-Cola Amatil

• Basis of management and oversight

Overview of Coca-Cola Amatil’s corporate governance

The basis of the management is taken care by the Board, who has been has delegated authority for managing the day-to-day operations and performance of the Company. Amatil has a comprehensive framework of delegations of authority it starts from the Group’s Managing Director to the GLT and then goes down to the respective levels of management. There exists a company secretary who is directly accountable to the Board for all matters to do with the proper functioning of the Board (Beekes, Brown and Zhang 2015).  The board aims in providing the stakeholders of the company sustainable value ensuring that they are well informed of Coca-Cola Amatil’s performance and major developments affecting its affairs Corporate Strategy. The board also takes care about the optimised financial reporting   processes by forecasting the profits and other reports that are required at law or under the ASX Listing Rules. The board also approves the major capital expenditure, acquisitions, divestitures, and capital management, including approving dividend payments(Haimes 2015). In addition to that the board monitors and influences the corporate culture and sets the values of Coca-Cola. Risk management framework is also set by the boards.

• Structure and outline of board for the firm value expansion

The structure of the Board as mentioned in the Boards Charter Nominations Committee Charter depends on the majority of the Board which is comprised of Independent Non-Executive Directors. This includes being independent from The Coca-Cola Company, and not being the Group Managing Director (Pearson 2016). In terms of election the one-third of the Board is required to retire at each Annual General Meeting but may stand for re-election as many times they want. The Directors who are to retire shall be those who have been longest in office since their last election, noting that Directors must retire at the third AGM, or three years since their last election whichever is longer and a Director who has been appointed by the Board to fill a casual vacancy is required to retire and stand for election by the shareholders at the next AGM (Richards et al., 2015). As the Group Managing Director’s position as a Director is linked to an executive office, the Group Managing Director is not required to stand for election/re-election. 

• To undertake the  exercises of business responsibly and ethically

The Coca-Cola Amatil ethics and responsibility is mentioned in the Code of Conduct where there is the vivid elaboration of “How We Do Business”. It was updated by the Board in the financial year of 2017. The code of conduct sets out the mechanism in which the Directors, employees, contractors, consultants and third parties are required to conduct themselves on a regular basis. The document expresses the high standards of business conduct that is built on our commitment to act fairly, morally and lawfully with all stakeholders. The Board has approved a separate policy ant bribery and Corruption Policy in December 2017(Safari 2017). It sets out Coca-Cola Amatil’s zero tolerance for any bribery or corruption in our business dealings and operations anywhere in the world, including in respect of facilitation payments that may be customary or in fact legal in certain countries. The company focuses on “doing business the right way”. In all the countries where the company operates the focus is on the community partnerships and participation in public policy development. The Board has also approved a Human Rights Policy that provides the framework for the commitment to support the human rights. Coca-Cola Amatil ensures that the workplace, the supply chain and the community is safe, lawful and diverse.

• Presentation disclosure timely as well as fairly

Board composition and responsibilities

In the Disclosure & Communications Policy of Coca cola Amatil, it has a Policy of disclosure and communications that includes the following principles which is consistent with the continuous disclosure obligations under ASX listing Rules that govern the communication of Coca-Cola Amatil. The Coca-Cola Amatil according with the requirements of the ASX Listing Rules, immediately issues to ASX for any information that a reasonable person would expect to have a material effect on the price or value of Coca-Cola Amatil’s securities(Lama and Anderson, 2015). There exists a Coca-Cola Amatil’s Disclosure Committee that manages the daily constant issues of disclosures and operates informally and flexibly. It is responsible for compliance, coordinating disclosure and educating employees about Coca-Cola Amatil’s Disclosure and Communications Policy. The Coca-Cola Amatil’s shareholders are encouraged to make their views known to Coca-Cola Amatil and to directly raise matters of concern. The views of those parties are shared with the Board on a regular basis, both by the Chairman and management.

• To safeguard the integrity in the corporate reporting process

As per the Audit & Finance Committee Charter, approving financial reports, profit forecasts and other reports required at law or under the ASX Listing Rules. The Corporate governance and reporting structure plays an important role in supporting the organization and ensuring the strategy (Du Plessis, Hargovan and Harris 2018). It provides the outline through which the business and strategic goals are established, performance is supervised, and the risks that have been controlled. There is a proper standard for decision making and accountability and provides guidance on the standards of behaviour that are expected from each other. In the 2017 Corporate Governance Statement there is the description of the key governance arrangements and practices. The company complies with the third edition of the Council for ASX Corporate Governance’s Corporate Governance Principles and Recommendations (ASX Recommendations), which is reflected in this Corporate Governance Statement (Wilson, 2017.

• To preserve the power and authorities of shareholders of the organisation

In the company of Coca Cola Amatil, the rights of Coca-Cola Amatil’s shareholders are detailed in Coca-Cola Amatil’s Constitution. The rights include electing the members of the Board. Additionally, the shareholders have the right to vote on important matters that have an impact on Coca-Cola Amatil (Council and Exchange 2014). In order to allow the shareholders to effectively exercise these rights, the Board is committed to ensure that there is high quality communication to shareholders, the information that is communicated is relevant and useful. Moreover it is to be verified that it is communicated in a timely manner. The Coca-Cola Amatil gives shareholders the option to receive communications from, and send communications to, Coca-Cola Amatil and its Share Registry, Link Market Services Limited, electronically. Shareholders are even encouraged to attend the Coca-Cola Amatil’s Annual General meeting and may raise question regarding the activities of the company (Ergu, Kou, Shi and Shi  2014).

• To properly Expose and handle  the risk of the firm that has been identified

The risk & sustainability Committee Charter and the Audit & Finance Committee Charter deals with Risk Management Policy. The Board is responsible for ensuring that there are adequate systems and procedures in place to identify, assess, monitor and manage risks. The Risk and Sustainability Committee reviews and reports the management during the year makes recommendations to the Board in respect of the material risks that Coca-Cola Amatil faces in the markets in which it operates. Other Committees review risk matters in more detail as required by their respective Charters (Kou, Peng and Wang 2014). The internal and external audit functions, which are separate and independent of each other, provide an independent and objective review of Coca-Cola Amatil’s risk assessment and risk management. When it comes to risk management policy the board has established a Risk Management Policy that formulates the approach to the oversight and management of material business risks. The Risk Management Policy is implemented through a top down and bottom up approach to identifying, assessing, monitoring and managing key risks across Coca-Cola Amatil’s business units.

• To present a Fair and responsible mechanism of remuneration structure

Ethical standards and conduct

In the annual report of 2017, that consist of the people committee that has approved new measurable objectives for provide a fair remuneration to its employees and also related benefits to them. There exist a remuneration committee that gives assistance to the Board regarding the Remuneration policy of the Board, Company Secretary and CEO (Kent, Kent Routledge, and Stewart, 2016). It also evaluates the Performance and remuneration evaluation of senior management and deals with the Remuneration strategies, practices and disclosures generally that includes non-routine remuneration arrangements. Various employee equity plan, Management succession, capability and talent development are taken care by them as well.

Brief overview of the company

The Coca Cola Amatil is a public listed Australian company that is the largest non-alcoholic beverage company that operates in six companies namely, Australia, New Zealand, Indonesia, Papua New Guinea, Fiji and Samoa (Ashley 2017). They produce, carbonated soft drinks, energy drinks, spring waters, and fruit juices. It has more than 14700 employees and is listed under the Australian Stock Exchange. The Coca Cola Company has 29.37% shareholding in the coca coal company.

Regulation of client

The clients are regulated by the subordinates and managements who are employed by the board of directors.

Market Overview

The market share of the Coca Cola Amatil is 90 %( Hanrahan and Bednall 2015). The company focuses of on differentiated and cost advantage products for reaching the competitive advantage. Its main strategy is to retain the sustainability of the resources with smart technology and personified service.

Balance Sheet Ratio	Amount (US$M)	Amount (US$M)
Quick Ratio	2017	2016
Quick Assets	2130	2429
Current Liabilities	1839	1843
Ratio	1.16	1.32
Debt Equity Ratio
Total Liabilities	4177	4054
Shareholder’s Equity	1549	2064
Ratio	2.70	1.96
Receivable Turnover
Revenue	4881	5091
Accounts Receivable	922	871
Ratio	5.29	5.85
Ratio for Income Statement
Operating Margin
Operating Income	-272	-510
Revenue	4881	5091
Ratio	-0.06	-0.10
Net Profit Margin
Net Income	445	246
Revenue	4881	5091
Ratio	0.09	0.05
Return on Equity
Net Profit	445	246
Shareholder Equity	1549	2064
	0.29	0.12

Analysis of Common size statement-horizontal analysis

COCA-COLA AMATIL LTD  INCOME STATEMENT
Fiscal year ends in December. AUD in millions except per share data.	2016 in $m	2017 in $m	% change
Revenue	5091	4881	-4.12%
Cost of revenue	3012	2840	-5.71%
Gross profit	2079	2042	-1.78%
Operating expenses
Sales, General and administrative	863	837	-3.01%
Restructuring, merger and acquisition
Other operating expenses	1726	1477	-14.43%
Total operating expenses	2590	2314	-10.66%
Operating income	-510	-272	-46.67%
Interest Expense	115	104	-9.57%
Other income (expense)	1018	986	-3.14%
Income before taxes	393	610	55.22%
Provision for income taxes	136	149	9.56%
Net income from continuing operations	257	461	79.38%
Other	-11	-16	45.45%
Net income	246	445	80.89%
Net income available to common shareholders	246	445	80.89%
Earnings per share
Basic	0.32	0.59	84.38%
Diluted	0.32	0.56	75.00%
Weighted average shares outstanding
Basic	764	745	-2.49%
Diluted	764	796	4.19%
EBITDA	777	976	25.61%

Analysis Balance sheet

COCA-COLA AMATIL LTD  (CCL) BALANCE SHEET
Fiscal year ends in December. AUD in millions except per share data.	2016-12	2017-12	% change
Assets
Current assets
Cash
Cash and cash equivalents	1378	1038	-24.67%
Total cash	1378	1038	-24.67%
Receivables	871	922	5.86%
Inventories	676	670	-0.89%
Deferred income taxes	2	5	150.00%
Prepaid expenses	37	67	81.08%
Other current assets	141	97	-31.21%
Total current assets	3105	2800	-9.82%
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	4428	4332	-2.17%
Accumulated Depreciation	-2479	-2467	-0.48%
Net property, plant and equipment	1949	1865	-4.31%
Equity and other investments	26	28	7.69%
Goodwill	119	148	24.37%
Intangible assets	1089	1060	-2.66%
Prepaid pension benefit	21	23	9.52%
Other long-term assets	156	134	-14.10%
Total non-current assets	3359	3257	-3.04%
Total assets	6464	6057	-6.30%
Liabilities and stockholders’ equity
Liabilities
Current liabilities
Short-term debt	422	421	-0.24%
Capital leases
Accounts payable	581	587	1.03%
Deferred income taxes	42	28	-33.33%
Other current liabilities	799	803	0.50%
Total current liabilities	1843	1839	-0.22%
Non-current liabilities
Long-term debt	1960	1930	-1.53%
Capital leases
Deferred taxes liabilities	156	284	82.05%
Pensions and other benefits	58	56	-3.45%
Minority interest	346	331	-4.34%
Other long-term liabilities	-309	-263	-14.89%
Total non-current liabilities	2211	2338	5.74%
Total liabilities	4054	4177	3.03%
Stockholders’ equity
Common stock	2256	1907	-15.47%
Other Equity	415	399	-3.86%
Retained earnings	-585	-621	6.15%
Accumulated other comprehensive income	-22	-136	518.18%
Total stockholders’ equity	2064	1549	-24.95%
Total liabilities and stockholders’ equity	6118	5726	-6.41%

• According to the annual report of 2017, it has been found that the debt equity ratio of the company is 2.70. It is calculated by dividing the total debt of the company by its total equity (Hanrahan  and Bednall 2015). High ratio like more than 1 represents that the company is highly leveraged and the higher interest burden can lead the company to unsustainable level.
• The quick ratio that represents the liquidity position of the company is very low like less than 1.16. This shows that the current assets of the company are considerably low if it is compared to current liabilities (Xu, How, and Verhoeven 2017). Hence it can be said that the organisation is not efficient in paying off the obligation of short term with their short term assets.
• The shareholders return is low that is 0.29, the operating profit margin is running negative as to -0.06. The net profit margin of the company is as low as 0.09. It signifies that the company is not so efficient in earning return.

The various steps to reduce the risk in the company are as follows:

• To develop a sound risk management plan: Having enough insurance to protect against losses is only one aspect. Taking proactive steps to cross-train is another key way to avoid risk. However, a proper plan of risk management will provide a measure for reducing the risk (Lama and Anderson 2015).
• To employ internal control consultants:An outsider completely unconnected to a company’s daily operations who can view the situation more objectively and more readily identify areas in need of improvement. Thus, he should be employed.
• To identify and review the internal controls of the company: The management must checks the balances of the company. With regard to safety issues, internal controls can be as simple as implementing a checklist of precautions before entering a work zone.

Reference

Ashley, R., 2017. Coca-Cola Amatil: Insights from the company monitor. Equity, 31(6), p.16.

Beekes, W., Brown, P. and Zhang, Q., 2015. Corporate governance and the informativeness of disclosures in Australia: A re?examination. Accounting & Finance, 55(4), pp.931-963.

Council, A.C.G. and Exchange, A.S., 2014. Corporate governance principles and recommendations. ASX Corporate Governance Council.

Du Plessis, J.J., Hargovan, A. and Harris, J., 2018. Principles of contemporary corporate governance. Cambridge University Press.

Ergu, D., Kou, G., Shi, Y. and Shi, Y., 2014. Analytic network process in risk assessment and decision analysis. Computers & Operations Research, 42, pp.58-74.

Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.

Hanrahan, P. and Bednall, T., 2015. Independence of directors affiliated with substantial shareholders: issues of law and corporate governance. COMPANY & SEC. LJ, 33, p.239.

Kent, P., Kent, R.A., Routledge, J. and Stewart, J., 2016. Choice of governance structure and earnings quality. Accounting Research Journal, 29(4), pp.372-390.

Kou, G., Peng, Y. and Wang, G., 2014. Evaluation of clustering algorithms for financial risk analysis using MCDM methods. Information Sciences, 275, pp.1-12.

Lama, T. and Anderson, W.W., 2015. Company characteristics and compliance with ASX corporate governance principles. Pacific Accounting Review, 27(3), pp.373-392.

Pearson, G., 2016. Failure in corporate governance: financial planning and greed. Handbook on Corporate Governance in Financial Institutions, p.185.

Richards, Z., Thomas, S.L., Randle, M. and Pettigrew, S., 2015. Corporate Social Responsibility programs of Big Food in Australia: a content analysis of industry documents. Australian and New Zealand journal of public health, 39(6), pp.550-556.

Safari, M., 2017. Board and audit committee effectiveness in the post-ASX Corporate Governance Principles and Recommendations era. Managerial Finance, 43(10), pp.1137-1151.

Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.

Wilson, R.E., 2017. Coca-Cola Amatil: A Bottler Recharging Growth with Energy Drinks. Kellogg School of Management Cases, pp.1-15.

Xu, S., How, J. and Verhoeven, P., 2017. Corporate governance and private placement issuance in Australia. Accounting & Finance, 57(3), pp.907-933.